NRCGT penalty

In July 2016 I found out that my client (who lives in Indonesia) had sold a UK buy to let property in October 2015. I immediately sent in a NRCGT return online. He now has a penalty notice for £1,300 for not sending in the return within 30 days of the conveyance. The gain returned is £204. The fine seems to me to be disproportionate and unjust because he, not unreasonably, expected to return the details of the gain on his 2016 tax return in the normal way. With hindsight I can see that I should have flagged this up just because he is a non resident landlord in case he happened to want to sell a property. I am looking for reasonable excuses to appeal this and pointed out that knowing he is non resident his solicitor should have warned him about the 30 days. The solicitor is well respected locally and has replied candidly that he knew nothing about the 30 day time limit and to be fair neither did I at the start of the 2015-16 tax year. I know that not knowing the rules is no excuse but this seems so unfair. If professionals don’t know about new online reporting rules how can the tax payer in Indonesia (where communications are not the best) be expected to know? Is there any way to challenge this and is anyone else in the same boat?

Hi Angela , I was very much in the same boat , but my post fell off the edge when the forum platform changed . I will try and get it reinstared . My appeal against the penalty was accepted . There was a post by the Faculty in about Feb this year , about HMRC changing their position ,on the occasions when an NRCGTreturn was not necessary , but i think that to be useable , the FA needs royal assent , which was delayed , but is now imminent . I am no expert in this , and would welcomew , as would you , some informed input on the subject . Julian

Thanks Julian
Can I ask what the grounds for your appeal were? My client's only excuse is that he genuinely had no idea that he was not totally compliant. Was there a technical flaw somewhere in the process of putting the penalties in place that make his position reasonable? The penalties are the same as for a late tax return but there was no end of publicity in advance of late tax return penalties coming in. I think people were made aware that CGT would run on non resident gains on UK rental property wef April 2015, but publicity for the harsh penalty regime seemed to be lacking to me.

Likewise, our client was not informed by their solicitor of the requirement to file an NRCGT form on disposal of their UK property. At the point they came to us to complete their SAR, several months had already passed.

Based upon the ICAEW technical release re ‘No Loss No Gain’, we decided to file the SAR only with a white space note referring to the reason why an NRCGT form was not filed.

We had used a literal interpretation of the ICAEW release as I believe Julian has in his replies above.

When the Finance Act 2016 received Royal Assent it became clear that the definition of No Loss No Gain was a lot narrower than implied in the ICAEW notice.

We immediately filed an NRCGT but full expect that the client will be receiving a penalty notice any time now.

Our client contacted the solicitor involved who merely came back with – ‘with all due respect, we are solicitors not accountants’

We have further asked some of the solicitor practices that we act for and they appear to be simply unaware of the requirement to file – as such they are still not advising clients.

We agree, the penalty regime is widely unknown and totally disproportionate to ‘the crime’.

We have written to all of our non-resident clients who may potentially be affected by this legislation in the future.

Residency status cannot always be determined until after the end of the tax year – one would hope that a successful appeal could be made if a late NRCGT return was filed in these circumstances.

As in the initial query, may we ask again please if anyone can suggest a course of action in appealing against these totally unfair penalties?

The differing deadlines for UK and non UK residents must be contrary to EU law for those now resident in other EU Countries

I have copied below a post from another thread on another forum which suggests writing to your MP can lead to a reduction in penalties. This is perhaps the biggest indication yet that the Government realises these penalties are unjust.

Thank you eft, we have asked HMRC to review our failed appeal and if that also fails we will ask for a tribunal. Our MP wrote to HMRC on our behalf and they say that they will refund some of the daily penalties but so far we have not heard anything from them ourselves so we do not yet know by how much this will reduce the the fines.

PS I'm sure there were approaching 50 responses to this post. What happened to those that I can no longer see?

Hi both my wife and I were fined £1300 each for late declaration of CGT on our home in UK as we were French residents. (In a split year)
We appealed and the appeal was accepted, fines cancelled.
I was not told why the appeal was accepted but I suspect it was because we were in a split tax year between UK and France. I note that the HMRC website now lists split tax year as no reason for not making the declaration.
Secondly I asked the HMRC when the website went live notifying people of the change in the rules and this was not until Nov 2016. In my appeal I noted that we checked the rules when we put the property on the market in August 2016. So unless I continued to check every month how was I to know they changed the rules on us.

If you are a french tx resident selling your UK property you should have a look to the French/UK tax treaty. Be careful not to be taxed in both countries...For more details you can have a look here https://avocatdroitfiscal.paris/fiscalite-internationale That is on this website I discovered the double taxation rule and the necessity to file certain French tax papers in order not to be double taxed.

I have copied below the NRCGT return late filing statistics for the five month period to 30 June 2017. They show nearly one third of all returns submitted in this period were filed late. The actual percentage must surely be higher with individuals either still unaware of the filing obligation or incorrectly having decided to attempt to fly under HMRC's radar given the draconian penalty regime in place.

I can confirm that HMRC holds some information which falls within the scope of your request. NRCGT data is now only available on a quarter end basis. For the five month period 1 February to 30 June 2017 the information you have requested is as follows:

 The number of NRCGT returns filed = 6,897
 The number of the above returns that were filed late = 2,159
 The number of late filing penalties charged = 1,494

There is a difference between the second and third figures due to internal process delays. HMRC is currently processing those NRCGT returns received late and will apply penalties, in accordance with the relevant legislation, in due course. Penalties can be appealed where there is a reasonable excuse for filing the return late.

For those of you who have not yet read Lee Sharpe's humorous summary of the birth of this new reporting regime, enjoy the following:

Hey, chaps! I have an absolutely whizzer idea! Let’s make taxpayers fill in forms whose only purpose is to tell us about other forms they’re going to be filling in later. So if they don’t tell us about the forms they’re going to be filling in, then we can penalise them for not filling in the first form about the second form. But to make this really work, we need to make this new form about something really obscure, so that nobody will realise the new form applies to them until it’s too late. Now, all we need is some new tax measure that quietly overturns principles that have applied for decades…”

Sadly for 2,159 people in the 5 month period to 30 June 2017, the reality may be a £700 penalty which could have been £1,600 but for public pressure. Mr Hammond, surely you can improve on this mess left by your predecessor?

Perhaps the decision makers read Lee Sharpe's attack on the NRCGT penalty regime which penalised many people who were simply unaware of their filing obligation. It must be hoped that HMRC will now refund all penalties issued and not compound the mistreatment of those affected by lodging an appeal against this decision.